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: for Share in Property Not Barred from
In a significant ruling, the has held that a where the developer retains a share of the constructed area cannot be treated as a , and therefore a suit for of such an agreement is maintainable. Justice Sharmila U. Deshmukh set aside a trial court order that had rejected an interim injunction sought by the developers, and granted the relief in their favor.
The Dispute
The appellants—Rahul Ganesh Mehta, Kirankumar Kanubhai Kotdiya, and Bhavesh Jeram Babriya—entered into a on with the first respondent, Narayan Ganpat Gaikwad, who had been allotted a plot under ’s 22.5% scheme. The agreement stipulated that the appellants would develop the entire plot, hand over 50% of the constructed built‑up area along with a consideration of ₹1.88 crore to Gaikwad, and retain the remaining 50% for themselves. A tripartite agreement was to be executed after handed over possession.
The appellants paid ₹70.80 lakh towards the consideration. In , executed a lease deed in favor of Gaikwad and later handed over physical possession in . However, Gaikwad never informed the appellants about the possession. In , the appellants discovered that Gaikwad’s son, Nandkumar Gaikwad, to whom the plot had been gifted, was attempting to transfer the property to a third party, . The appellants filed a suit for and sought an interim injunction restraining any creation of third‑party rights.
Trial Court’s Error
The trial court rejected the injunction application on two main grounds: the appellants had not produced any evidence that they were developers or had carried out construction, and the agreement fell under , which bars of pure construction contracts unless specific conditions are met. The court observed that the appellants could be compensated in money.
High Court’s Analysis
Justice Deshmukh noted that the trial court had overlooked Clause 7 of the agreement, which obliged Gaikwad to execute the tripartite agreement after possession was handed over. The court held: “It is not necessary for the developer to prove his credentials and it would have been perfectly possible for the Plaintiffs to engage a contractor for the purpose of carrying out construction. There was no clause in the agreement which required the satisfaction of such credentials of the Plaintiffs.”
Relying on the ’s decision in Sushil Kumar Agarwal v. Meenakshi Sadhu (2019), the High Court explained that development agreements can create a in the property. The court distinguished a from an agreement where the developer acquires a right in the land or the constructed area. Here, the appellants were to retain 50% of the built‑up area, giving them a substantial interest that could not be adequately compensated by money.
The court also rejected the contention that the appellants had been inactive, noting that Clause 23 of the agreement made . The breach, if any, was on the part of the respondents for failing to inform the appellants about possession and for attempting to sell the property to Defendant No. 3, whom the trial court itself had found not to be a .
Key Observations
“The Trial Court erred in construing the agreement as by applying Section 14(3)(c). By construing the agreement as construction contract, the Trial Court has applied the consideration of absence of any construction carried out by Plaintiffs prior to present contract.”
“It is not necessary for the developer to prove his credentials and it would have been perfectly possible for the Plaintiffs to engage a contractor for the purpose of carrying out construction.”
“The Plaintiffs have made out a for grant of injunctive reliefs… The Plaintiffs have complied with their obligations and have acquired an interest in the property, which is one of the .”
The Verdict
The High Court allowed the appeal, quashed the trial court’s order of , and allowed the appellants’ application for . The injunction restrains the respondents from creating any third‑party rights over the suit property pending the outcome of the suit. The ruling reinforces that a developer who stakes a claim to a portion of the constructed area is not a mere contractor, and the remains available to protect such interests.
